CASE STUDY: NEW SHOE COMPANY (adopted from Proctor, T. (2005) Essentials of Marketing Research), Pearson Education. The New Shoe Company, based in the English Midlands, is experiencing a fall in profits. The company measures profits in terms of the annual pre-tax return on capital employed earned by the company. The sales director says that falling profitability is a reflection of the current slump in the market. Total demand in the marketplace is much less than it was 12 months ago and the company has struggled to maintain its market share at the previous level as competition has intensified. Competition from European manufacturers has been sharpened by changes in EU trading regulations and Spanish manufacturers, in particular, have taken advantage of their lower cost structure to make inroads into the British market. At the same time, the New Shoe Company has failed to take full advantage of opportunities in Europe. It has not fully developed its market niching strategy where it can gain a competitive advantage. The sales director blames the firm's lack of competitiveness on the poor performance of the R&D team and the inability of the manufacturing departments to control costs. The technical director claims that the firm's products are competitive with any that are produced worldwide. Indeed, in her view, the firm's products are by far the best available at the price offered. She points to the lack of marketing effort expended by the firm in the past year, pointing to the necessity to keep the firm's name before the public at all times, especially when competition is increasing in strength. At the same time she recognises that marketing effort requires financing and that this was not adequately provided during the period in question. The production director points out that the company has been able to lower its manufacturing costs substantially through the introduction of new technology into the manufacturing process. However, he points out the accounting practices adopted by the firm distort the true picture. Profitability, in his view, has improved, although this is not truly reflected in the company's management accounts. The finance director feels that the drop in profitability is attributable to recent acquisitions the firm has made. Ventures into retailing have not been as profitable as had first been supposed. This might to some extent have been reflective of bad timing on behalf of the company, given the current recession, in making such acquisitions. The managing director points out that there clearly is a problem and that perhaps one should pay particular attention to what competitors are doing and how the firm is responding from a marketing viewpoint.

Questions 1. Given the limited information in this case, what do you think could be the real problem or problems in this example?

2. Depending on the real nature of the problem identified, how might research help in this case?